Second Circuit Refuses Kalshi And Coinbase Injunction In New York And Connecticut
A federal appeals court has refused to shield Kalshi and Coinbase from state enforcement of gambling laws on sports event contracts.
A Second Circuit panel denied both companies' motions for an injunction pending appeal on Tuesday, November 3, 2026, according to InGame. Law360 reports the judges appeared unconvinced by the platforms' attempts to separate sports event contracts from sports bets.
The panel of Judges John M. Walker Jr., Joseph F. Bianco and Dennis Jacobs heard arguments from lawyers for Kalshi, Coinbase and the Commodity Futures Trading Commission (CFTC), as well as from New York and Connecticut, and ruled shortly afterwards.
The written order was short. It said the appellants failed to make the showing required for an injunction pending appeal, and did not set out detailed reasoning.
What The Judges Said At Hearing
The questions during the argument were more revealing. Judge Walker said he did not see how sports betting in its entirety could be a swap, because a swap requires an underlying event tied to potential financial, economic or commercial consequences.
Judge Bianco said the definition was written with financial markets in mind and that applying it to sports felt like forcing a square peg into a round hole.
Bianco also raised a practical worry. If downstream economic effects were enough to make a sports contract a swap, he said, that logic would bring in a traditional sportsbook such as Caesars, which the law would then treat as an off-exchange swap.
Kalshi's lawyer argued that Congress intended the swap definition to be broad and then gave the CFTC additional authority over contracts involving gaming.
Coinbase's lawyer said the case is about core contracts on who wins a game and that the Commodity Exchange Act has no sports carve-out. The same fault lines have run through earlier rulings, including the Ninth Circuit decision backing Nevada and the Sixth Circuit ruling on Ohio.
What Is At Stake In New York
Both states won in district court, then sued Kalshi in state court after the federal rulings. New York is seeking billions of dollars in damages.
Those state cases are on hold while the appeals proceed, but with no injunction in place, Kalshi remains exposed if the state courts rule against it.
Kalshi's lawyer told the panel that New York's requested order would apply to all event contracts, not just sports, and would be nationwide.
Kalshi is based in New York, which makes the state suit particularly consequential. InGame reports the CFTC has told Kalshi to disobey the New York order if it ever takes effect.
Kalshi is also trying to move both state cases into federal court, but InGame notes similar attempts elsewhere have failed because the bar is higher than for an injunction.
Harm, Valuation And The CFTC's Position
The argument on harm turned partly on money. Connecticut's lawyer said Kalshi's value is such that the loss of sports contracts should not constitute irreparable harm, citing the company's closing of a $1 billion funding round at a $40 billion valuation last week.
Judge Walker questioned whether that valuation depended on sports contracts, which would suggest the business would struggle without them.
The valuation follows earlier reports that Kalshi was in talks to raise $1 billion. Meanwhile, the CFTC's lawyer said the agency is building a framework for event contracts and bringing enforcement actions against insider trading and manipulation, warning that state jurisdiction could harm those cases.
The merits appeals continue. The panel's skepticism at the hearing, though, suggests Kalshi and Coinbase face a tough road on the central argument that sports contracts are swaps under federal law.
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